PETROHAWK ENERGY CORPORATION 
By HOUSTON, Aug. 3, 2011 /PRNewswire/ -- Petrohawk Energy Corporation ("Petrohawk" or the "Company") (NYSE: HK) today announced its second quarter 2011 operational and financial results, including significant growth in production, revenues, and cash flows.
Production for second quarter averaged 943 Mmcfe/d, a 15% quarter-over-quarter increase. Second quarter total production was 85,803 Mmcfe, of which approximately 89% was natural gas, 7% was crude oil or condensate, and 4% was natural gas liquids. Revenues for the quarter were $595 million, a 21% increase over first quarter 2011 and a 69% increase compared to the same period one year ago. The Company realized 92% of the average NYMEX oil price, 97% of the average NYMEX natural gas price, and 47% of the NYMEX oil price for natural gas liquids during second quarter.
Cash flow from operations before changes in working capital (a non-GAAP financial measure; see Condensed Consolidated Statements of Cash Flows for a reconciliation to net cash provided by operating activities) was $302 million for the quarter, or $0.99 per fully diluted common share, compared to $246 million, or $0.81 per fully diluted common share for the first quarter 2011, and $163 million, or $0.54 per fully diluted common share for the same period one year ago. Net income for the quarter, after adjusting for selected items (primarily related to the non-cash impact of derivatives), was $57 million, or $0.19 per fully diluted common share (see Selected Item Review and Reconciliation table for additional information). Before excluding selected items, the Company reported net income of $104 million, or $0.34 per fully diluted common share for the quarter.
Cash operating costs (including lease operating expense, workover expense, taxes other than income, gathering and transportation expense, and general and administrative expense) were $1.69 per Mcfe for the quarter, compared to $1.56 per Mcfe for first quarter 2011 and $1.64 per Mcfe for the same period one year ago. General and administrative expense of $0.50 per Mcfe, compared to $0.45 per Mcfe in first quarter and $0.65 per Mcfe for the same period one year ago, reflected advisory fees associated with the Kinder Morgan Energy Partners L.P. transaction (discussed below) as well as a legal settlement paid during the quarter. Lease operating expense was $0.16 per Mcfe for the quarter, compared to $0.17 per Mcfe for the prior period and $0.29 per Mcfe during the second quarter of 2010. Taxes other than income increased from $0.16 per Mcfe for the first quarter 2011 to $0.20 per Mcfe for the second quarter. Gathering and transportation expense for oil and gas increased from $0.69 per Mcfe for the prior period to $0.75 per Mcfe, and depletion expense, a non-cash item, was $2.20 per Mcfe for the quarter compared to $2.06 per Mcfe for the first quarter of 2011.
During the second quarter, Petrohawk spent approximately $621 million on drilling and completions, $239 million on leasehold acquisitions, primarily in the Permian region, and $77 million on gathering and treating infrastructure, primarily in the Eagle Ford Shale. At June 30, the Company's revolving credit facility had an outstanding balance of approximately $559 million.
On July 1, Petrohawk completed the sale of its remaining interest in KinderHawk Field Services LLC and a 25% interest in EagleHawk Field Services LLC to affiliates of Kinder Morgan Energy Partners, L.P. This transaction netted pre-tax proceeds of approximately $836 million, which were used to pay down the Company's revolving credit facility and as working capital for general corporate purposes.
Haynesville Shale
During the quarter, the Company averaged 11 operated rigs and drilled 21 operated wells, with net production in the field averaging 684 Mmcfe/d. Sixty-seven non-operated Haynesville Shale wells and 3 Bossier Shale wells were drilled during the quarter. Non-operated activity exceeded expectations during the quarter, in terms of both activity level and capital expenditures, primarily due to the transition to full section development by some operators during the quarter. Petrohawk expects that lower rig counts publicly announced by many industry partners point to lower activity levels in the Haynesville Shale during the second half of the year. Petrohawk is currently operating six rigs and has two dedicated frac fleets in the Haynesville Shale.
The Company achieved an overall cost reduction trend in Haynesville Shale completions during the quarter. Savings of approximately $600,000 to $800,000 per well were accomplished largely as a result of changes in well design that require two fewer frac stages per well, lower overall sand requirements per well, and improved pricing for resin coated sand. During the quarter Petrohawk averaged slightly less than 45 days spud to spud, more than 5 fewer days than during the preceding quarter. Significant additional improvements are expected as the Company moves toward pad drilling and full section development toward the end of 2012.
Improvements in water handling and usage have contributed to more flexibility in water sourcing in the Haynesville Shale. Approximately half of all Petrohawk-operated wells in field have been completed with 20% recycled water. Year to date, the Company has pumped approximately over 2 million gallons of recycled waste water on well completions in the Haynesville Shale.
Eagle Ford Shale
The Black Hawk area (DeWitt County, Texas) continues to produce excellent results. A majority of Petrohawk-operated wells were produced on a constrained basis due to transportation infrastructure limitations. During the quarter, Petrohawk averaged nine operated rigs in the Black Hawk area, with 25 operated and one non-operated wells drilled. Net production from Black Hawk averaged 73 Mmcfe/d, comprised of 22% natural gas, 62% condensate and 16% natural gas liquids. Transportation infrastructure issues for the Company are moderating in the area with the addition of a dedicated truck fleet. Modifications to facilities at the Company's Point Comfort barge facility are nearly complete and the facility is expected to begin operating during the third quarter.
In Hawkville Field (LaSalle and McMullen Counties, Texas), Petrohawk averaged five operated rigs and drilled 15 operated wells and two non-operated wells during the quarter. Net production in the field averaged 129 Mmcfe/d, comprised of 67% natural gas, 14% condensate and 20% natural gas liquids. Well performance in Hawkville Field has continued to improve as a result of the expanded implementation of HiWAY frac technology, deployed by two dedicated Schlumberger hydraulic fracturing fleets. Petrohawk and Schlumberger are experimenting with variations in the HiWAY design, including higher sand volumes and fiber concentrations, in an attempt to optimize well performance for each area of the Eagle Ford trend. In addition, the Company is testing new frac designs in both the Hawkville Field and Black Hawk area with its Halliburton dedicated hydraulic fracturing fleet.
Results in the Red Hawk prospect in Zavala County, Texas, failed to meet minimum expectations during the quarter. As a result, capital spending at Red Hawk will be terminated and capital budgeted for 2011 will be reallocated to other operating areas.
Permian Region
Petrohawk is currently operating four rigs in the Permian region, all concentrated in the Delaware Basin where the majority of the Company's leasehold is located. An initial vertical well in Culberson County, Texas tested approximately 1.0 Mmcf/d of 1250 BTU gas from the Wolfcamp formation. Total depth was reached on the Company's first horizontal Bone Springs well in Reeves County, Texas. A completion date for this well has been set for early August. A commingled Wolfcamp and Bone Springs vertical completion in Reeves County is planned with a completion date expected in mid-August. The Company is also currently drilling the lateral portion of its first horizontal Wolfcamp well in Culberson County with a planned completion date of mid-August. In addition, the Company is undertaking necessary infrastructure construction in order to market all products with minimum delays as wells come online.
Petrohawk Energy Corporation is an independent energy company engaged in the acquisition, production, exploration and development of oil and natural gas with properties concentrated in North Louisiana, in the Haynesville Shale; South Texas, in the Eagle Ford Shale; and West Texas, in the Delaware and Midland Basins.
For more information contact Joan Dunlap, Vice President - Investor Relations, at 832-204-2737 or jdunlap@petrohawk.com. For additional information about Petrohawk, please visit our website at www.petrohawk.com.
Additional Information for Investors
This press release contains forward-looking information regarding Petrohawk that is intended to be covered by the safe harbor for "forward-looking statements" provided by of the Private Securities Litigation Reform Act of 1995, such statements are based on Petrohawk's current expectations and includes statements regarding acquisitions and divestitures, drilling plans and capital expenditures, estimates of future production, future results of operations, quality and nature of the asset base, and other expectations, beliefs, plans, objectives, assumptions, strategies or statements about future events or performance (often, but not always, using words such as "expects", "anticipates", "plans", "estimates", "potential", "possible", "probable", or "intends", or stating that certain actions, events or results "may", "will", "should", or "could" be taken, occur or be achieved). Statements concerning oil and gas reserves also may be deemed to be forward-looking statements in that they reflect estimates based on certain assumptions including that the resources involved can be economically exploited. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those reflected in the statements. These risks include, but are not limited to: the risks of the oil and gas industry (for example, operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas deposits; risks associated with the timing of and potential proceeds from divestitures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to future production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; health, safety and environmental risks and risks related to weather such as hurricanes and other natural disasters); uncertainties as to the availability and cost of financing; fluctuations in oil and gas prices; risks associated with derivative positions; inability to realize expected value from acquisitions, inability of our management team to execute its plans its meet our goals, shortages of drilling equipment, hydraulic fracturing crews, oil field personnel and services, unavailability of gathering systems, pipelines and storage and processing facilities, inability to transport condensate and natural gas liquids to geographic locations where it can be successfully marketed and the possibility that government policies may change or governmental approvals may be delayed or withheld, including the possibility of new and restrictive regulation relating to hydraulic fracturing. Additional information on these and other factors which could affect Petrohawk's operations or financial results are included in Petrohawk's reports on file with the SEC. Investors are cautioned that any forward-looking statements are not guarantees of future performance and actual results or developments may differ materially from the projections in the forward-looking statements. Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Petrohawk does not assume any obligation to update forward-looking statements should circumstances or management's estimates or opinions change.
PETROHAWK ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
Three Months Ended June 30,
---------------------------
2011 2010
---- ----
Operating revenues:
Oil and natural gas $443,729 $239,834
Marketing 149,486 107,338
Midstream 1,865 3,954
Total operating revenues 595,080 351,126
------- -------
Operating expenses:
Marketing 161,049 117,309
Production:
Lease operating 13,726 16,384
Workover and other 4,308 1,571
Taxes other than income 16,779 5,111
Gathering, transportation and
other:
Oil and natural gas 64,327 30,289
Midstream 2,574 3,010
General and administrative:
General and administrative 42,682 36,792
Stock-based compensation 7,620 6,308
Depletion, depreciation and
amortization 192,808 99,855
Total operating expenses 505,873 316,629
Amortization of deferred gain 46,508 64,367
------ ------
Income from operations 135,715 98,864
Other income (expenses):
Net gain (loss) on derivative
contracts 83,507 (16,625)
Interest expense and other (67,019) (61,533)
Equity investment income 17,339 2,047
Total other income (expenses) 33,827 (76,111)
------ -------
Income from continuing operations
before income taxes 169,542 22,753
Income tax provision (64,660) (8,741)
------- ------
Income from continuing operations,
net of income taxes 104,882 14,012
Loss from discontinued operations,
net of income taxes (753) (517)
Net income $104,129 $13,495
======== =======
Net income (loss) per share:
Basic:
Continuing operations $0.35 $0.05
Discontinued operations - (0.01)
Total $0.35 $0.04
===== =====
Diluted:
Continuing operations $0.34 $0.05
Discontinued operations - (0.01)
Total $0.34 $0.04
===== =====
Weighted average shares
outstanding:
Basic 301,603 300,426
======= =======
Diluted 305,464 302,446
======= =======
Six Months Ended June 30,
-------------------------
2011 2010
---- ----
Operating revenues:
Oil and natural gas $793,937 $540,425
Marketing 290,030 237,457
Midstream 2,837 11,026
Total operating revenues 1,086,804 788,908
--------- -------
Operating expenses:
Marketing 315,947 253,931
Production:
Lease operating 26,337 33,779
Workover and other 9,184 3,949
Taxes other than income 28,514 17,871
Gathering, transportation and
other:
Oil and natural gas 115,816 52,578
Midstream 3,980 8,877
General and administrative:
General and administrative 75,977 64,737
Stock-based compensation 14,300 10,397
Depletion, depreciation and
amortization 350,120 204,623
Total operating expenses 940,175 650,742
Amortization of deferred gain 94,976 64,367
------ ------
Income from operations 241,605 202,533
Other income (expenses):
Net gain (loss) on derivative
contracts 32,600 198,078
Interest expense and other (133,822) (124,379)
Equity investment income 30,910 2,047
Total other income (expenses) (70,312) 75,746
------- ------
Income from continuing operations
before income taxes 171,293 278,279
Income tax provision (65,231) (107,975)
------- --------
Income from continuing operations,
net of income taxes 106,062 170,304
Loss from discontinued operations,
net of income taxes (3,161) (674)
Net income $102,901 $169,630
======== ========
Net income (loss) per share:
Basic:
Continuing operations $0.35 $0.57
Discontinued operations (0.01) (0.01)
Total $0.34 $0.56
===== =====
Diluted:
Continuing operations $0.35 $0.56
Discontinued operations (0.01) -
Total $0.34 $0.56
===== =====
Weighted average shares
outstanding:
Basic 301,321 300,292
======= =======
Diluted 305,101 302,715
======= =======
PETROHAWK ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)
June 30, December 31,
-------- ------------
2011 2010
---- ----
Assets:
Current assets $674,287 $638,037
Net oil and natural gas
properties 6,529,860 5,132,904
Assets held for sale - 74,448
Equity investment 211,990 217,240
Other noncurrent assets 1,624,496 1,561,813
--------- ---------
Total assets $9,040,633 $7,624,442
========== ==========
Liabilities and
stockholders' equity:
Current liabilities $1,082,135 $857,323
Long-term debt 3,766,380 2,612,852
Other noncurrent
liabilities 523,461 609,981
Stockholders' equity 3,668,657 3,544,286
--------- ---------
Total liabilities and
stockholders' equity $9,040,633 $7,624,442
========== ==========
PETROHAWK ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Ended June 30,
---------------------------
2011 2010
---- ----
Cash flows from operating activities:
Net income $104,129 $13,495
Adjustments to reconcile net income to
net cash
provided by operating activities:
Depletion, depreciation and
amortization 192,808 101,175
Income tax provision 64,191 8,423
Loss on sale - -
Stock-based compensation 7,620 6,308
Net unrealized (gain) loss on
derivative contracts (31,056) 87,424
Amortization of deferred gain (46,508) (64,367)
Equity investment income (17,339) (2,047)
Distributions from equity affiliate 20,013 4,236
Other operating 7,745 8,408
----- -----
Cash flow from operations before
changes in working capital 301,603 163,055
Changes in working capital (4,624) 2,299
------ -----
Net cash provided by operating
activities 296,979 165,354
------- -------
Cash flows from investing activities:
Oil and natural gas capital
expenditures (991,621) (567,289)
Proceeds received from sale of oil and
natural gas properties 83 474,418
Proceeds received from the
contribution of Haynesville gas
gathering systems - 921,408
Proceeds received from sale of
Fayetteville gas gathering systems - -
Marketable securities purchased (175,000) (752,006)
Marketable securities redeemed 175,000 471,000
Increase in restricted cash - (75,005)
Decrease in restricted cash - 53,995
Other operating property and equipment
capital expenditures (80,338) (101,249)
------- --------
Net cash (used in) provided by
investing activities (1,071,876) 425,272
---------- -------
Cash flows from financing activities:
Proceeds from exercise of stock
options 1,207 773
Proceeds from borrowings 2,230,000 371,000
Repayment of borrowings (1,438,585) (960,812)
Debt issuance costs (17,611) (704)
Other - (134)
--- ----
Net cash provided by (used in)
financing activities 775,011 (589,877)
------- --------
Net increase in cash 114 749
Cash at beginning of period 1,541 1,393
----- -----
Cash at end of period $1,655 $2,142
====== ======
Six Months Ended June 30,
-------------------------
2011 2010
---- ----
Cash flows from operating activities:
Net income $102,901 $169,630
Adjustments to reconcile net income to
net cash
provided by operating activities:
Depletion, depreciation and
amortization 350,120 207,249
Income tax provision 63,280 107,561
Loss on sale 3,950 -
Stock-based compensation 14,300 10,397
Net unrealized (gain) loss on
derivative contracts 83,909 (102,671)
Amortization of deferred gain (94,976) (64,367)
Equity investment income (30,910) (2,047)
Distributions from equity affiliate 36,160 4,236
Other operating 18,914 16,757
------ ------
Cash flow from operations before
changes in working capital 547,648 346,745
Changes in working capital (7,617) (27,219)
------ -------
Net cash provided by operating
activities 540,031 319,526
------- -------
Cash flows from investing activities:
Oil and natural gas capital
expenditures (1,674,519) (1,206,288)
Proceeds received from sale of oil and
natural gas properties 76,109 491,094
Proceeds received from the contribution
of Haynesville gas gathering systems - 921,408
Proceeds received from sale of
Fayetteville gas gathering systems 76,898 -
Marketable securities purchased (330,000) (978,006)
Marketable securities redeemed 330,000 697,000
Increase in restricted cash (295,748) (75,005)
Decrease in restricted cash 295,748 231,523
Other operating property and equipment
capital expenditures (134,653) (173,840)
-------- --------
Net cash (used in) provided by
investing activities (1,656,165) (92,114)
---------- -------
Cash flows from financing activities:
Proceeds from exercise of stock options 4,941 1,276
Proceeds from borrowings 3,679,500 942,000
Repayment of borrowings (2,539,262) (1,165,780)
Debt issuance costs (24,861) (704)
Other (4,120) (3,573)
------ ------
Net cash provided by (used in)
financing activities 1,116,198 (226,781)
--------- --------
Net increase in cash 64 631
Cash at beginning of period 1,591 1,511
----- -----
Cash at end of period $1,655 $2,142
====== ======
PETROHAWK ENERGY CORPORATION
SELECTED OPERATING DATA (Unaudited)
(In thousands, except per unit and per share amounts)
Three Months Ended June 30,
---------------------------
2011 2010
---- ----
Production:
Natural gas - Mmcf 76,533 54,494
Crude oil - MBbl 986 225
Natural gas liquids - MBbl 559 179
Natural gas equivalent - Mmcfe 85,803 56,918
Average daily production - Mmcfe 943 625
Average price per unit:
Realized crude oil price - as reported $94.02 $74.55
Realized impact of derivatives (2.35) 2.03
----- ----
Net realized crude oil price - Bbl $91.67 $76.58
====== ======
Realized natural gas price -as
reported $4.20 $3.97
Realized impact of derivatives 0.72 1.29
---- ----
Net realized natural gas price - Mcf $4.92 $5.26
===== =====
Realized natural gas liquids price -
as reported $48.56 $36.30
Realized impact of derivatives (0.69) -
Net realized natural gas liquids price
-Bbl $47.87 $36.30
====== ======
Cash flow from operations (1) 301,603 163,055
Cash flow from operations -per share
(diluted) 0.99 0.54
Average cost per Mcfe:
Production:
Lease operating 0.16 0.29
Workover and other 0.05 0.03
Taxes other than income 0.20 0.09
Gathering, transportation and other:
Oil and natural gas 0.75 0.53
Midstream 0.03 0.05
General and administrative:
General and administrative 0.50 0.65
Stock-based compensation 0.09 0.11
Depletion 2.20 1.72
Six Months Ended June 30,
-------------------------
2011 2010
---- ----
Production:
Natural gas - Mmcf 143,430 109,269
Crude oil - MBbl 1,703 466
Natural gas liquids - MBbl 1,085 187
Natural gas equivalent - Mmcfe 160,158 113,187
Average daily production - Mmcfe 885 625
Average price per unit:
Realized crude oil price - as reported $90.64 $74.93
Realized impact of derivatives (1.77) (0.12)
----- -----
Net realized crude oil price - Bbl $88.87 $74.81
====== ======
Realized natural gas price -as
reported $4.07 $4.56
Realized impact of derivatives 0.84 0.87
---- ----
Net realized natural gas price - Mcf $4.91 $5.43
===== =====
Realized natural gas liquids price -
as reported $47.94 $36.34
Realized impact of derivatives (0.57) -
Net realized natural gas liquids price
-Bbl $47.37 $36.34
====== ======
Cash flow from operations (1) 547,648 346,745
Cash flow from operations -per share
(diluted) 1.79 1.15
Average cost per Mcfe:
Production:
Lease operating 0.16 0.30
Workover and other 0.06 0.03
Taxes other than income 0.18 0.16
Gathering, transportation and other:
Oil and natural gas 0.72 0.46
Midstream 0.02 0.08
General and administrative:
General and administrative 0.47 0.57
Stock-based compensation 0.09 0.09
Depletion 2.14 1.75
(1) Represents cash flow from operations before changes in working
capital. See the Consolidated Statements of Cash Flows for a
reconciliation from this non-GAAP financial measure to the most
comparable GAAP financial measure.
PETROHAWK ENERGY CORPORATION
SELECTED ITEM REVIEW AND RECONCILIATION (Unaudited)
(In thousands, except per share amounts)
Three Months Ended June 30,
---------------------------
2011 2010
---- ----
Unrealized loss (gain) on derivative
contracts:(1)
Natural gas $8,987 $110,294
Crude oil (40,130) (22,870)
Natural gas liquids 87 -
--- ---
Total mark-to-market noncash charge (31,056) 87,424
Amortization of deferred gain (46,508) (64,367)
Loss on sale(2) 1,166 -
Loss on sale of ranch(3) - -
Expense of deferred financing
costs(4) - -
Loss on early extinguishment of
debt(5) - -
--- ---
Total selected items, before tax (76,398) 23,057
Income tax effect of selected items 29,094 (8,946)
------ ------
Selected items, net of tax (47,304) 14,111
Net income (loss), as reported 104,129 13,495
Net income, excluding selected items $56,825 $27,606
======= =======
Basic net income (loss) per share, as
reported $0.35 $0.04
Impact of selected items (0.16) 0.05
----- ----
Basic net income per share, excluding
selected items $0.19 $0.09
===== =====
Diluted net income (loss) per share,
as reported $0.34 $0.04
Impact of selected items (0.15) 0.05
----- ----
Diluted net income per share,
excluding selected items $0.19 $0.09
===== =====
Six Months Ended June 30,
-------------------------
2011 2010
---- ----
Unrealized loss (gain) on derivative
contracts:(1)
Natural gas $74,241 $(80,590)
Crude oil 9,410 (22,081)
Natural gas liquids 258 -
--- ---
Total mark-to-market noncash charge 83,909 (102,671)
Amortization of deferred gain (94,976) (64,367)
Loss on sale(2) 902 -
Loss on sale of ranch(3) 4,320 -
Expense of deferred financing
costs(4) 208 -
Loss on early extinguishment of
debt(5) 3,012 -
----- ---
Total selected items, before tax (2,625) (167,038)
Income tax effect of selected items 1,000 64,811
----- ------
Selected items, net of tax (1,625) (102,227)
Net income (loss), as reported 102,901 169,630
Net income, excluding selected items $101,276 $67,403
======== =======
Basic net income (loss) per share, as
reported $0.34 $0.56
Impact of selected items (0.01) (0.34)
----- -----
Basic net income per share, excluding
selected items $0.33 $0.22
===== =====
Diluted net income (loss) per share,
as reported $0.34 $0.56
Impact of selected items (0.01) (0.34)
----- -----
Diluted net income per share,
excluding selected items $0.33 $0.22
===== =====
(1) Represents the non-cash unrealized loss (gain) associated with
the mark-to-market valuation of outstanding derivative contracts.
(2) Amount is presented net of income taxes in "Loss from
discontinued operations, net of income taxes" as it relates to the
Fayetteville Shale assets which have been classified as discontinued
operations.
(3) Represents loss on the sale of Company's interest in the Buffalo
Hump Ranch in Arkansas, which was divested in March 2011.
(4) Represents non-cash charges related to the write-off of debt
issuance costs associated with the senior revolving credit facility.
(5) Represents a non-cash charge related to the write-off of the
unamortized discount on the Company's 7.125% Senior Notes due April
1, 2012, which were redeemed in the first quarter of 2011.
SOURCE Petrohawk Energy Corporation
